(Thinkstock Images)By 2020, almost 96% of mobile phones sold in India will be locally manufactured, according to a research report.

India is set to increase its domestic localisation rate, says the report titled ‘Indian Mobile Phone market: Emerging Opportunities for fulfilling India’s Digital Economy Dream’, released by Enixta, an artificial intelligence company, and Internet & Mobile Association of India (IAMAI). In 2016, two out of every three mobile phones sold in India were domestically produced.

Speaking at the launch of the report, Dr. Ajay Kumar, Additional Secretary, Ministry of Electronics and Information Technology, exuded confidence that in the next 5 to 10 years, nearly 25% of the global economy would be actually determined by the digital economy. He said that the Internet economy was the biggest opportunity in India and had the potential to be bigger than the ITeS industry.

Currently, India is the second-largest smartphone market in the world in terms of number of users but it is expected to be the biggest market for global smartphone sales in the next few years.

In FY 2019-20, India’s smartphone manufacturing industry would be worth Rs 1,20,200 crore, the report claimed. The size of the domestic mobile manufacturing industry in FY 2019-20 is expected to be Rs 1,35,000 crore as against Rs 94,000 in FY 2016-17.

According to the report, there is a high possibility to build local sourcing capabilities for mobile phone components such as battery pack, non-electronic parts, accessories, packaging, etc. though the main electronic components will require a longer tenure to be sourced locally.

The report, which has studied the smartphone market in India from the perspective of consumer’s needs and application, depicts a huge potential for increasing the local value addition in the domestic manufacturing industry.

According to the report, the demand for the mobile phones in India is largely met through imports. Much of the domestic mobile phone production in India is limited to assembling/packaging of SKD (semi-knocked down) kits.

This low level of local value addition is due to a weak manufacturing eco-system which in turn stems from limited capabilities across various stages of the manufacturing value chain.